Can SK Hynix Save the Semiconductor Industry with Sevenfold Oversubscription?

Original | Odaily Planet Daily (++@OdailyChina++)

Author | Azuma (++@azuma_eth++)

Bloomberg reported this morning, citing informed sources, that South Korean semiconductor giant SK Hynix has seen its "American Depositary Receipts" (ADR) subscription rate exceed seven times, potentially becoming the largest foreign IPO in U.S. history.

Previously, at the end of June, SK Hynix submitted an F-1 prospectus to the U.S. SEC, planning to issue 177.9 million ADRs to list on NASDAQ (with each ADR representing one-tenth of a common share). Based on the closing price of 2,076,000 KRW (approximately 1,380 USD) in the Korean market on Wednesday, the total fundraising amount is expected to reach about 24.5 billion USD. The funds raised will be entirely used for capacity expansion in South Korea, including the Yongin wafer fab, Cheongju advanced packaging lines, and investments in EUV and related equipment.

SK's U.S. Move Amid Semiconductor Sector's Deep Correction

As SK Hynix heads to the U.S. for its IPO, the entire semiconductor sector is undergoing a significant correction.

Over the past two years, investment in AI infrastructure has been the core driving force behind the rise of the semiconductor sector. Benefiting from the continuous capital expenditures of tech giants like Microsoft, Google, Meta, and Amazon, the industry chain represented by GPUs, HBM storage, and advanced process equipment has experienced explosive growth in performance, driving stock prices to soar.

However, recently, the market has begun to reassess the sustainability of this logic. First, Meta was reported to plan to sell some idle computing resources, interpreted by the market as a signal that tech giants are optimizing their AI infrastructure investments. Subsequently, Blackstone's planned construction of the world's largest data center project was also canceled, further reinforcing market concerns about the slowing demand growth for data centers.

These events are not entirely equivalent to the end of the "AI investment cycle," but they have triggered a re-evaluation of a key question in the market ------ after hundreds of billions of dollars in capital investment, can tech giants maintain the current growth rate of AI capital expenditures?

As a result, the AI industry chain has recently come under pressure. From chips and storage to semiconductor equipment, the market trading logic has shifted from "unlimited demand growth" to "whether future growth can still be realized." SK Hynix's stock price has also seen a significant correction, dropping from a high of 2,917,000 KRW on June 25 to 2,076,000 KRW at yesterday's close, a maximum retracement of nearly 30%.

Secondary Market Under Pressure, Primary Market Extremely Hot

Interestingly, amid the ongoing adjustments in the secondary market, SK Hynix's U.S. listing has garnered far more funding interest than expected.

As mentioned earlier, the subscription rate for this ADR issuance has already exceeded seven times, indicating strong enthusiasm from institutions. According to information disclosed in SK Hynix's roadshow materials, the subscription demand mainly comes from various institutions, including global long-term funds, tech-themed funds, sovereign wealth funds, and Asian-themed investors, with institutions like Baillie Gifford, Coatue Management, and Situational Awareness Partners expressing a combined subscription intention of approximately 7 billion USD.

Note that Situational Awareness is a fund controlled by the newly dubbed "AI stock god" Leopold Aschenbrenner, which can be said to be the most explosive fund in this AI cycle. For details, refer to "SBF's Little Brother: Turning 225 Million into 5.5 Billion in One Year," and "Overview of 24-Year-Old 'AI Stock God' Latest Layout: 60% Position Hedging Semiconductor Downturn."

The enthusiasm from institutions suggests that, at least from a long-term funding perspective, the market has not completely denied the AI infrastructure investment cycle. In fact, the recent correction in the semiconductor sector is essentially more of an adjustment in valuation and expectations rather than a reversal of the industry's fundamentals. Investors are concerned about whether future capital expenditure growth will slow down, rather than whether current core products like HBM and AI chips have lost demand.

Additionally, it is worth mentioning that there has been speculation in the market regarding the timing of SK Hynix's listing: before landing on NASDAQ, the stock price may undergo a significant adjustment, perhaps to ensure a better performance post-listing, pleasing the company, underwriters, institutions, and retail investors alike...

This logic may not be entirely verifiable, but in trading terms, it could indeed strengthen the market's optimistic expectations for post-IPO performance ------ for the issuer, a lower valuation starting point is beneficial for price performance after listing; for subscribing institutions, it also means greater potential upside.

Therefore, SK Hynix's U.S. listing could very well become an important turning point for sentiment in the semiconductor market in the short term.

The Real Turning Signal Lies in the Next Answer from Tech Giants

However, the heat of SK Hynix's U.S. IPO alone does not seem to fully answer whether the adjustment in the semiconductor sector has ended.

From an industry cycle perspective, the core of the current market debate is not whether AI demand still exists, but whether tech giants can continue to maintain the current scale of capital investment. Over the past two years, companies like Microsoft, Google, Meta, and Amazon have continuously ramped up AI infrastructure construction, pushing global data center investment into a phase of rapid expansion. According to plans previously announced by major tech giants, AI-related capital expenditures are expected to remain high in the coming years.

However, at the same time, as the scale of investment continues to grow, investors are increasingly concerned about "when these massive capital investments can be converted into actual business returns."

If AI application growth can match infrastructure investment, then the current correction in the semiconductor sector is more like a digestion of valuations after an increase; but if tech giants begin to slow down data center construction and reduce GPU procurement pace, then the high growth expectations previously given to the AI industry chain will face re-evaluation. Therefore, the upcoming quarterly earnings reports from tech giants will be key to judging the direction of the semiconductor market.

In other words, while SK Hynix's listing may serve as a catalyst for short-term sentiment in the semiconductor sector, the real determinant of whether the AI cycle can continue will still be the clear answers from tech giants like Microsoft, Google, Meta, and Amazon regarding future capital expenditures.